Homework Answers
Solution,
The maximum amount of S that can be produced = 1,000 units
The opportunity cost of producing T is 2 units of S.
This means that for producing 1 unit of T, 2 units of S has to be sacrificed.
Calculate the maximum units of T that can be produced -
Maximum units = Maximum units of S that can be produced/Opportunity cost of producing T
Maximum units = 1,000/2 = 500 units
Thus,
The maximum amount of T that can be produced is 500 units
In construction of PPF for country A, Good T is taken on Y-axis and thus 500 units will act as Y-intercept and Good S is taken on X-axis and thus 1,000 units will act as X-intercept.
Following is the PPF for Country A -
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